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Hello John, I'm Keith and happy to help you with your question
You can withdraw you pension pots after April 2015 providing you are over 55 years of age. These will be subject to Income Tax at your marginal rate. At 20K per annum you will be in the 20% tax band for 10K of income after using your personal allowance. Of the 20% tax band you will have used 10K, leaving you 31.866K - 10K = 21.886 available at 20%. Thus of your 116K pot the balance of 84.134K will suffer tax at 40%. There is a further complication as if you have other sources of income this may push you over the 100K income limit beyond which you loose 1 pound of personal allowance for every 2 pounds of income over the limit. You might be well advised to stagger the payment over 2 tax years to preclude this reduction. Please be aware that as yet the legislation for this is in the Finance Bill, 2014 which can still be amended as it passes through its Commons stages.
One way or the other you may be liable to higher rates tax. As yet the Chancellor is silent as to the 15/16 tax rates, but be careful as the Government clearly has a policy of squeezing the tax bands in successive year
I suggest that you seek local, trusted advice form an accountant with a view to mitigating your possible liability.
Could you please tell me how I would be taxed on just £45000 one year and how much for £71000 tax the following year please.Thank you and kind regards,John Lenihan.